By sticking to its 'conserve when times are good, capitalise when times are bad' approach, IGB Corp has weathered many an economic storm, emerging stronger after each downturn.IGB Corp Bhd group managing director Robert Tan is not being glib when he admits — a day after the one-year anniversary of the Lehman Brothers collapse that triggered a global economic and financial crisis which the world is still recovering from — that it’s a “pretty exciting time” at the company.
Tan’s disclosure is certainly not one of nonchalance, but rather recognition that these tough times present opportunities for one of the country’s top developers. “When the market is up, it’s not too exciting for us, but it’s a pretty exciting time now. We conserve when times are good and capitalise when times are bad. So now we’re in an aggressive mode,” he says.
The aggressive mode notwithstanding, Tan describes the company’s financial results for the first six months of 2009 as being “pretty flat”. Not only has the company managed to survive the turmoil that began a year ago with the collapse of some of the world’s largest financial institutions, Tan says the mood has been positive. “Initially, we thought that our performance, especially the malls (Mid Valley Megamall and Gardens) would dip but we have actually managed to lock in higher turnover. Mall turnover, he discloses, is up by 3% for the six months of 2009 compared with the previous half, thanks to the sales and promotional activities undertaken by the retailers.
“Barring any unforeseen circumstances, we should be in the same financial position as last year,” he adds.
Having weathered some seven to eight periods of economic downturn, Tan credits IGB Corp’s resilience to its prudent financial management. “We’re not concerned so much about whether the economy is up or down… what’s important is to put yourself in a situation where you can capitalise on it.” And as a testimony to the fact that going on the offensive does pay off, Tan says the company has “grown and become stronger after each downturn”.
While, by and large, there are lessons learnt from each period of recession, it is by sticking to this philosophy of capitalising on opportunities that has allowed IGB Corp to navigate through tough times. “We cannot miss this window of opportunity because if we miss it, we’ll have to wait for the next cycle,” he says. Even so, the company is treading with a measure of prudence. “We look at what we are able to afford because we are putting a portion of our reserves into that investment,” he says of the investment considerations. “It’s easy to be aggressive but difficult to be restrained and prudent.”
Be that as it may, Tan is not allowing opportunities to slip by. In the last six weeks alone, he’s chalked up 50,000 miles, travelling to the US, Europe, China and Southeast Asia scouting for investments to add to IGB Corp’s portfolio. Tan cites the US and Europe as regions that offer opportunities and bargains. “There are some hotels to be acquired; we’ve identified a few but we’re still at the negotiation stage,” he says, adding that the company is eyeing hotel properties in large cities such as New York, London, Paris and Rome.
IGB Corp is no stranger to the hospitality business, having created the first hotel apartments in Malaysia with the MiCasa Hotel Apartments. The developer also has hotels at its landmark development Mid Valley City — namely, the Gardens Hotel & Residences, Boulevard Hotel and Cititel — as well as several other hotels around the country. IGB Corp also owns two hotels in London — St Giles Hotel in Central London and St Giles Hotel at Heathrow Airport.
Besides the hospitality sector, IGB Corp is also looking at residential development opportunities in the UK. “In Vietnam and China, we’re looking at residential and some commercial opportunities,” he says, adding that there has been suggestions that the company venture into retail developments abroad, given its experience developing Mid Valley. “We’re more cautious when it comes to retail; it’s not an easy sector to penetrate, but hotels, offices and residential… these we can do.”Transforming to an asset-based company
Over the decades, IGB Corp and its residential property development arm Tan & Tan Developments Bhd have made their mark in the Malaysian property scene. From Desa Kudalari, the country’s first condo development, to Sierramas, a gated residential development in a resort setting, IGB Corp is recognised as one of the country’s most innovative property developers.
And while the company continues to offer niche residential developments, such as Hampshire Place, Cendana and U-Thant Residence, Tan admits that the company’s bottom line is not dependant on property development activities. “We’re not under pressure to launch new properties,” he says, describing the company’s property launches in 2008 as “small launches that are not significant enough to mention”.
But by that Tan is not dismissing these developments, rather he’s reiterating the company’s transformation in the last 15 years from a property development company to that of an asset-based one. “Rather than build and sell, we now build and keep so that it gives us recurring income,” he says, disclosing that currently 70% of the company’s turnover is derived from recurring income.
Much of this transformation is thanks to its Gardens development at Mid Valley City. The Gardens North and South Towers each offers 425,000 sq ft of gross lettable area, said to be by far one of the largest space offered by any office building in the country. This additional one million sq ft of space is said to boost IGB Corp’s total office portfolio to 4 million sq ft, making it Malaysia’s largest owner and manager of commercial properties.
Not building concrete jungles
In developing new properties, “going green” is an important consideration. Besides creating rooftop gardens — which the company has already introduced at The Gardens Hotel & Residences — IGB Corp is also looking into rainwater harvesting. “We’re also looking at ways where we can recycle waste water and try to use heat-resistant glass for our buildings,” says Tan.
He adds that as a responsible corporate citizen, IGB Corp doesn’t plan on building concrete jungles. “Here at Mid Valley City, we have a concerted effort to green the area as much as possible. I tell my people to plant more and keep planting… we’ve planted more plants than what was originally here,” he says, pointing to the pockets and strips of green around the development from the vantage point of his penthouse office at The Gardens office tower.
Going forward, while IGB Corp is not under any pressure to launch new products, it does have a few developments in the pipeline. Some of these include projects that were delayed such as Stonor and Mid Valley City Parcel 3. “We have between RM500 million and RM1 billion of gross development value to launch once the market starts to improve,” he says.
He recognises that the uncertainty in the market means there’s more need for caution. “The seas have been choppy, characterised by many peaks and troughs… while it’s anticipated that we’re in for a long L-shaped recovery, the big question is when will ‘L’ end. But for us at IGB Corp, we will continue with our business and plod along.”
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 776, Oct 12-18, 2009.
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